Strategic Audit of Haier Group

Case 24 Strategic Management MGMT 436Group 5

Current Situation (Jw Hayes) A. Current Performance 2001 to 2004

Organized into 6 Divisions:

Haier China

Haier Europe

Haier America

Haier Middle East

Haier Spain

Haier New Zealand (L., and Hunger 24-2)

Top 100 Most recognized Worldwide Brand Name

20 Year Old Company from China

Produce Home Electrical Appliances

18 Design Centers

10 Industrial Parks

30 Overseas factories and manufacturing bases

58,800 Sales offices

96 Product Group Categories To include :

Refrigerators, Washing Machines, Air Conditioners, Cell phones, TV’s(L., and Hunger 24-1)

(Jw Hayes)

2004 Global Sales $12 Billion

4th in Global Sales revenue for White goods in 2004

21% Market Share China overall Appliances

34% Market Share China Major Home appliances

14% Market Share China small electronic appliances

(L., and Hunger 24-16)

(Jw Hayes)

B. Strategic Posture

MissionTo improve the quality of life, focusing on customers' needs

Objectives Haier strives to create innovative and affordable

quality products, to deliver sincere, delightful and

caring services, in order to satisfy different customers

("Haier: about us," 2011)

(Jw Hayes)

Policies(Jw Hayes)

Expand Brand Recognition

Offer Niche products while expanding diverse product line

Maintain strict cost control to keep product prices competitive

Continue quick development programs and fast production updates

Maintain strong distribution network and supply chain relationships

(L., and Hunger 24-1-26)

Strategies

Brand Name Strategy

7 years built strong brand name in Refrigerator products

thru Total Quality control System

Products known for quality and innovation

Diversified Development Strategy

6 years to diversify product catalogue

By 2004 13,000 products in 86 categories

Three Stage Growth Plan

L., and Hunger 24-23-24)

Going Multinational Strategy

First move into Southeast Asia

Second expand into United States in 1990’s

European entrance in 2001

Japan expansion in 2002

2005 Haier has 62 distributors and

30,000 retail outlets worldwide

Eventual GoalTo be listed among Fortune 500 Successful Companies

L., and Hunger 24-23-24

2. Corporate GovernanceA. Board of DirectorsName Title Age

Zhang Ruimin Chairman and Chief Executive Officer 61

Yang Mianmian President and Director 65

Chai Yongsen Executive Vice President and Executive Director 44

Cui Shaohua Vice President and Executive Director 49

Song Chunguang Vice President, Sales Director of Pegasus Qingdao, Deputy General Manager of Pegasus Qingdao and Executive Director

43

Liang Haishan Vice President and Executive Director 40

Cao Chunhua Vice President, General Manager of Washing Machine Division and Executive Director 38

(Bloomberg, 2011)

(Jw Hayes)

Name (Connections) Primary Company Age

Wu Kesong Haier Group Company 56

Kin Kau Lam Mark Neo Telemedia Limited 56

Wu Yinong Haier Electronics Group Co., Ltd. 44

Hoi Wing Fung Henry Global Energy Resources International Group Limited

51

OTHER BOARD MEMBERS ON BOARD MEMBERS

(Bloomberg, 2011)

(Jw Hayes)

L., Thomas, and David Hunger. Strategic Management

and Business Policy: Achieving Sustainability.

Pearson College Div, 2009. 24-1-24-26. Print.

Haier: about us. (2011, May 10). Retrieved from

http://www.haiereurope.com/en/haier-mission

Bloomberg, Initials. (2011, May 10). Industrial

conglomerates. Retrieved from

http://investing.businessweek.com/research/stocks/private/

board.asp?privcapId=29621318

(Jw Hayes)

III. External Environment (EFAS table) (John Lerch)

A. Natural Environment

Weather factors associated with shipping overseas (T)

Long shipping times (T)

Economic B. Societal Environment

Lower production costs in China (O)

United States market is the largest in the world (O)

Rapid growth in electronics market (O)

High initial costs for producing products with more

features than (T)

Technological

Political-Legal High cost of competitors duties by manufacturing

overseas and selling in the U.S. (T)

Socio-cultural

Desire for new electronics in U.S. market (O)

(John Lerch)

Rivalry high in the U.S. (T)

Able to expand product lines through partnerships (O)

C. Task Environment(John Lerch)

III. EFAS Table(John Lerch)

V. Analysis of Strategic Factors (John Lerch)A. Situational Analysis (SWOT)

1. Strengths

2. Weaknesses

3. Opportunitiesa) Introduction of products to U.S. market at lower costb) International Partnerships

4. Threatsa) Competition in U.S. marketb) Lower response rate for stocking certain products and overstockingc) High initial investment to manufacturer products with more features than

competitors

V. SFAS Table (John Lerch)

VI. Strategic Alternatives and Recommended Strategy

(Shavera)A. Strategic Alternatives

1. Stability Strategy: Pause/Proceed with caution.

a. Pros: Enables the company to focus on new market

strategies, and consider focusing on its core products.

b. Cons: Possible loss of market share.

2. Growth Strategy: Horizontal Growth Strategy.

Target niche markets in the U.S. by developing a wider

range of products and services to satisfy their needs.

a. Pros: Enables the company to more quickly capture and respond to

local trends and increase competitiveness

(Wheelen & Hunger, 2010).

b. Cons: Aggressive competition

3. Retrenchment Strategy: Sell Out/Divestment Strategy.

a. Pros: Allows the company to exit out of markets like the

personal computers that are struggling and unprofitable.

b. Cons: Loss of market share and a decrease in profits.

(Shavera)

B. Recommended Strategy

Recommend alternative # 2 which is the Horizontal Growth Strategy.

Haier Company needs to focus on niche markets in the U.S. to satisfy

those customers’ wants and needs. The concentration should not be

on diversification, but rather building a strong brand name and

image in the U.S.

(Shavera)

Wheelen, T & Hunger, J. (2010). Strategic Management and Business Policy. 12th Ed. Prentice Hall.

(Shavera)

VII. Implementation (Travis)

A. Competition for Haier is all over the place. Finding

something like a new hit product that will make them stick out

over all the rest will benefit the company highly. However they

need to be careful to spend their money in the right areas and

make sure it doesn’t go to waste ending in a overall bankrupt.

B. Haier needs to improve its stocking abilities by using

technology to their advantage. They seem to lack in

keeping popular items on hand and ready to ship. Using

technology will help them keep up with what sells out the

quickest in various locations.

(Travis)

VIII. Evaluation and Control (Nick)